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Does the lease have to be stamped? How to calculate the stamp duty/stamp fee for a tenancy agreement?

In the process of renting a property, the landlord will generally sign a formal lease agreement with the tenant, and then will have a stamp, or pay the lease stamp duty, which simply means stamping at the Inland Revenue Department. So why stamp it? What exactly does this process involve? When do I need to stamp? Are both parties responsible for stamping after signing the lease agreement? The above problems will be solved one by one in this article.

Does the lease have to be stamped?

Although, the current legislation does not require all tenancy agreements to be stamped/paid stamp duty. However, the purpose of stamping/paying stamp duty is actually to protect the landlord and tenant. Stamping/paying stamp duty for the official tenancy agreement means that legally, it will be regarded as a valid document. For disputes over the tenancy, the printed tenancy agreement can be used as evidence in court, so that the problem can be reasonably resolved.

Another reason why it is recommended to stamp/pay stamp duty is that the law stipulates that once the stamp duty is not paid within 30 days after the tenancy agreement is signed, both the landlord and the tenant may face fines. The details are described in the next paragraph. In fact, many owners do not want to print, which may be tax evasion.

Secondly, since the process of stamping/paying stamp duty requires submitting the “CR109” form (Notice of New Lease or Renewal Agreement) to the Rating and Valuation Department and reporting property tax on this basis, the owner may wish to conceal the property Income, opting out of stamping/paying stamp duty for property tax reduction. However, tax evasion should not be attempted by yourself.

There is another reason why the owners do not want to stamp/pay stamp duty, that is, their properties or units may be HOS housing or public housing without land premium, illegal housing, etc. Under the premise of illegal rental, etc., they naturally do not want to be charged. Stamp/pay stamp duty.

How is the Stamp Duty on a Lease calculated?

First of all, according to the “Stamp Duty Ordinance”, the tax rate of stamp duty/lease agreement is calculated according to the lease term. Simply put, the longer the lease term, the higher the stamp duty/lease stamp duty, generally ranging from 0.25% to 1%. Under normal circumstances, stamp duty/tenancy stamp duty is shared between the landlord and the tenant.

According to the tenancy period, the stamp duty/lease stamp duty rates can be roughly divided into the following categories:

• Indefinite tenancy: Lease stamp duty is 0.25% of the annual or average annual rent

• Up to 1 year: Stamp duty on leases is 0.25% of the annual rent or average annual rent

• More than 1 year but not more than 3 years: Stamp duty on lease is 0.5% of annual rent or average annual rent

• More than 3 years: Lease stamp duty is 1% of annual rent or average annual rent

And once each copy of the tenancy agreement is stamped, it costs HK$5.

In other words, assuming a tenancy agreement of HK$10,000 per month for a period of 2 years, the stamp duty rate for the tenancy agreement is 0.5%, which means the tenancy agreement stamp duty is HK$50. In addition, for the convenience of landlords and tenants, the Inland Revenue Department also provides an online calculator (Calculation of Stamp Duty (Property) – Tenancy Agreement) for public use.

Penalty for late payment of stamp duty

As mentioned above, once the tenancy agreement is not stamped/paid within 30 days, the corresponding fine will be paid. For additional tax expenses, stamp duty should be paid on time:

• If not later than 1 month, the penalty is 2 times the amount of stamp duty;

• If the delay is 1 to 2 months, the penalty is 4 times the amount of stamp duty;

• Penalty is 10 times the stamp duty if it is more than 2 months late,

The above information is for reference only. If you have any questions about stamp duty, stamp duty, or accounting, we welcome your inquiry.

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